SEC Reviews How ISM Releases Manufacturing Data

WASHINGTON—The Securities and Exchange Commission is scrutinizing how certain investors might have received potentially market-moving information from the Institute for Supply Management ahead of the public, according to a person familiar with the inquiry, as the trade group changes its procedures to eliminate a delay in the distribution of the data.

The SEC probe is at an early stage and won't necessarily lead to any enforcement action, according to the person.

ENLARGE

SEC headquarters. The agency is looking into how some investors get key manufacturing data from a group.
Bloomberg News

Separately, ISM, which produces a closely watched manufacturing survey, said it has taken steps to close what is sometimes a 10-second gap between the time its report gets to traders and when a press release containing the survey's results is received by a broader audience.

"We are addressing the apparent delay and are very confident that appropriate controls are now in place," said Thomas W. Derry, ISM's chief executive officer. Mr. Derry took action after a page-one article in The Wall Street Journal pointed out the delay.

The SEC inquiry, which was reported Wednesday by the CNBC financial-news network, and the ISM changes come amid deepening scrutiny into how investors get market-moving information from nongovernmental organizations.

Last summer, ISM and Thomson Reuters Corp. entered into a deal in which Thomson Reuters would disseminate the data from ISM's monthly manufacturing report over high-speed lines to investors and others willing to pay a fee for quick access to the information, Mr. Derry said.

A person familiar with the inquiry said one area the SEC is probing is whether any investors received advance access to market-moving information illegally, rather than as part of a commercial relationship.

Earlier

The SEC contacted Thomson Reuters earlier this month to ask for information regarding its contract with the trade association. In a written statement, Thomson Reuters confirmed it received an inquiry from the SEC after "the inadvertent early release of ISM data" June 3, which it blamed on a "clock synchronization issue."

Under the arrangement, ISM releases the data from its monthly business survey in two ways. Thomson Reuters provides the data over ultrafast networks to investors who want to trade on the information nearly instantaneously. Separately, ISM distributes a press release with the data through an arrangement with PR Newswire, a firm that distributes press releases.

The Journal article reported that Thomson Reuters has told investors there can be a 10-second gap between when the two sets of data reach users.

Mr. Derry, the ISM chief, said he has taken steps to eliminate the gap for when the association releases its next report at 10 a.m. Monday.

"Our goal is to get to 10 o'clock sharp and we think we can get there," Mr. Derry said.

The Journal article earlier this month noted the various ways high-frequency traders and other investors can pay to get access to market-sensitive information before the public.

For example, investors who pay $5,000 month plus a $1,025 connection charge can get a consumer-confidence survey produced by the University of Michigan two seconds early.

In that arrangement, Thomson Reuters is paying the university $1.1 million in 2013 to be the exclusive distributor of the potentially market-moving survey results. Next year, the price will rise to $1.2 million, according to its contract.

Thomson Reuters and the University of Michigan have said that they have been transparent about how the information is distributed.

In addition, the Conference Board looked into arrangements that would give clients faster access to its consumer-confidence survey before announcing last week that it will release the data to everyone at once on its website. Jon Spector, the group's CEO, said the firm "basically became concerned that while it might be perfectly legal to monetize the data in certain ways, that it could contribute to the perception that the playing field wasn't level."

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